Work pension funds rebalancing. Does it make sense?

IamWood

Dear all,

My work pension is currently with L&G at the default option, L&G Multi Asset Fund 3. The growth so far is very moderate. I'd like to make a lumpsum contribution soon before/after rebalancing my funds.  A few questions please:

1) Should I rebalance my funds before or after lumpsum payment?

2) Potentially I have selected the following L&G pension funds:

    50%:  L&G Multi-Asset Fund 3 (https://fundcentres.lgim.com/uk/workplace-employee/fund-centre/Multi-Asset-Fund?isin_code=GB00B5W2CB33)

    35%: L&G PMC Asia Pacific (ex-Japan) Equity Index Fund 3 (https://fundcentres.lgim.com/uk/workplace-employee/fund-centre/Asia-Pacific-ex-Japan-Equity-Index-Fund?isin_code=GB00B4P7G503)

    15%:  L&G PMC North America Equity Index Fund 3 (https://fundcentres.lgim.com/uk/workplace-employee/fund-centre/North-America-Equity-Index-Fund?isin_code=GB00B3VGBC62)

Any advice / suggestions / opinions are welcomed!

Thank you!

Linton

1) How much effort you put into rebalancing and other details of your portfolio depends on its size both bsolutely and compared with your contributions,
 -  balancing a £20K pension pot will not make much difference in £ terms 
 - if you have only being putting money into your pension for say 5 years increasing you contributions by say 5% will have a far greater effect than whether you rebalance or not

2)  Your L&G multi-asset 3 is very cautious whereas your 35% in Asa ex-Japan and 15% in the US  are both fairly high risk.  I would consider getting rid of the 2 side funds and increasing the risk level of the multi-asset fund accordingly, perhaps to L&G Multi asset 5 0r 6 which should put you at about the same level of risk as the whole portfolio is now.  Then you could forget about rebalancing.    This would have the advantage of a much broader global spread.

3) If you want to keep with the 3 funds you should reconsider the relative proportions.  Your current equity (share) investments in various areas as a % ot the total portfolio is:
US : 18%
SE Asia: 36%
Europe (ex UK): 1%
UK:2%
Japan: 1%

Does this look sensible to you?

IamWood

Thank you very much @Linton, this is very helpful.

L&G does not seem to give me the option to invest on L&G Multi Index 4-6 through their online platform. I'll check it up. Thanks again.

AlanP_2

L&G do give you that option as I have it on their personal pension side.

Your employer (or their adviser) may have agreed a limited range of choices as part of the overall service wrap. L&G won't have as many but an employer scheme offering the 30k+ choices that some SIPPs have would overwhelm a lot of people who want something simple from their workplace pension.

Have you tried emailing / messaging them for a list of what you can invest in?

IamWood

AlanP_2 said:

Have you tried emailing / messaging them for a list of what you can invest in?

L&G just emailed me the list of the WorkSave Pension Plan. The list is very limited. Only L&G Multi Asset Fund 3 is offered. I can pick a few Global Equity Funds but is it wise to do so? Thanks!

IamWood

For discussion sake, if I try
90% L&G Multi Asset Fund 3
10% L&G PMC World (ex UK) Equity Index Fund 3

I get Equity distribution like roughly:

UK Equity 6.48

North America Equity 12.5

Europe ex UK Equity 6.6

Emerging Market Equity 6.6

Japan Equity 5.25

Developed Small Cap Equity 4.4

Asia Pacific ex Japan Equity 2.6

Middle East & African Equity 0.2

AlanP_2

That is about 38% equity so for the sake of argument let's say it's split 40/60 Equities and Bonds.

Traditional portfolios for retired people were often based on a 60/40 Equities and Bonds split.

Whether you would be happier with 40/60 is up to you but, if I remember rightly, you are reasonably young and have a good few years of investing ahead of you so perhaps could toletrate more volatility through a higher equity percentage as you would be buying more assets at lower prices if the market fell anyway.

IamWood

Thank you, @AlanP_2.

I'm fine with wider volatility. To continue the conversation, what about?

70%   L&G Multi Asset Fund 3
15%   L&G PMC Asia Pacific (ex-Japan) Equity Index Fund 3
15%   L&G PMC Ethical Global Equity Index Fund 3

The equity would be 40% * 75% + 15% + 15% = 60%

In terms of areas:
America: 58% * 15% + 6.8% * 70 % = 13.46%
UK:  6.2% * 15% + 7.2 % * 70% =  5.97 %
Asia (ex-Japan): 15% + 6.4% * 70% = 19.48%
Europe ex UK Equity:  6.6% * 70% + 8% * 15% = 5.82%
Other: ...

Does the calculation make sense? Was the fund combination making sense at all?

I start to hate L&G work pension platform now Lol.

IamWood

If the fund combination makes sense, I can go a bit further to balance the area, say:
60%   L&G Multi Asset Fund 3
15%   L&G PMC Asia Pacific (ex-Japan) Equity Index Fund 3
25%   L&G PMC Ethical Global Equity Index Fund 3